SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

Commission file number 0-22085

                                LORAL ORION, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


              Delaware                                    52-2008654
-------------------------------------                --------------------
     (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)                  Identification No.)


2440 Research Boulevard, Suite 400, Rockville, Maryland         20850
-------------------------------------------------------       ----------
         (Address of principal executive offices)             (Zip Code)

                                  301-258-8101
--------------------------------------------------------------------------------
               (Registrant's telephone number including area code)

Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
                                             ---  ---

THE REGISTRANT  MEETS THE  CONDITIONS SET FORTH IN GENERAL  INSTRUCTION H (1)(a)
AND (b) OF FORM 10-Q AND IS THEREFORE FILING WITH THE REDUCED  DISCLOSURE FORMAT
PURSUANT TO GENERAL INSTRUCTION H (2) OF FORM 10-Q.


                                       1

<PAGE>


PART I.  FINANCIAL INFORMATION

ITEM I.  FINANCIAL STATEMENTS

                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>


                                                                                      SEPTEMBER 30,       DECEMBER 31,
                                                                                         1999                1998
                                                                                      -------------       ------------
                                                                                       (Unaudited)            Note
<S>                                                                                 <C>                  <C>

                                     ASSETS

Current assets:
   Cash and cash equivalents                                                        $         16,520     $         35,861
   Restricted and segregated cash                                                            197,472               50,180
   Accounts receivable (less allowance for doubtful accounts of $2,556
     and $1,019 at September 30, 1999 and December 31, 1998, respectively)                    15,541               15,292
   Prepaid expenses and other current assets                                                  10,121                4,299
                                                                                    ----------------     ----------------
Total current assets                                                                         239,654              105,632

Restricted and segregated cash                                                                    --               22,675

Property and equipment at cost:
   Land                                                                                           74                   74
   Satellite and related equipment                                                           536,060              263,188
   Telecommunications equipment                                                               42,640               35,630
   Furniture and computer equipment                                                            9,565                8,693
                                                                                    ----------------     ----------------
                                                                                             588,339              307,585

Less accumulated depreciation                                                                (71,498)             (38,706)

Satellite construction in progress, including capitalized
   interest of $17,350 and $20,198 at September 30, 1999
    and December 31, 1998, respectively                                                      252,121              331,861
                                                                                    ----------------     ----------------
Net property and equipment                                                                   768,962              600,740

Due from Loral                                                                                    --                3,619
Costs in excess of net assets acquired associated
   with the Loral Merger, net                                                                597,112              608,015
Deferred income taxes                                                                         50,747               53,915
Other assets, net                                                                             22,578               22,908
                                                                                    ----------------     ----------------

TOTAL ASSETS                                                                        $      1,679,053     $      1,417,504
                                                                                    ================     ================

</TABLE>


----------

Note:  The  December  31,  1998  balance  sheet  has   been  derived  from   the
       audited consolidated financial statements at that date.

            See notes to condensed consolidated financial statements.

                                       2


<PAGE>


                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                  (IN THOUSANDS, EXCEPT SHARE AND PAR AMOUNTS)
                                   (CONTINUED)

<TABLE>
<CAPTION>


                                                                                     SEPTEMBER 30,        DECEMBER 31,
                                                                                         1999                1998
                                                                                     -------------        ------------
                                                                                      (Unaudited)             Note
<S>                                                                                 <C>                 <C>

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current portion of long-term debt                                                $          2,049    $           1,826
   Accounts payable                                                                           26,710                2,035
   Satellite purchase price payable                                                          194,430                   --
   Accrued and other current liabilities                                                      20,577               16,162
   Customer deposits                                                                           6,775                7,897
   Deferred revenue                                                                            2,867               35,841
   Interest payable                                                                           10,386               22,842
                                                                                    ----------------    -----------------
Total current liabilities                                                                    263,794               86,603

Long-term debt                                                                               955,155              931,669
Other long-term liabilities                                                                      150                  141
Due to Loral                                                                                  92,628                   --

Commitments and contingencies:
Stockholders' equity:
   Common stock, $.01 par value, 1,000 shares authorized; 100 shares
    outstanding at September 30, 1999 and December 31, 1998                                       --                   --
   Capital in excess of par value                                                            533,352              481,791
   Unearned compensation                                                                      (2,207)              (3,347)
   Accumulated other comprehensive income (loss)                                                (479)                 616
   Accumulated deficit                                                                      (163,340)             (79,969)
                                                                                    ----------------    -----------------
Total stockholders' equity                                                                   367,326              399,091
                                                                                    ----------------    -----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                          $      1,679,053    $       1,417,504
                                                                                    ================    =================

</TABLE>


----------

Note:  The  December  31,  1998  balance  sheet   has  been  derived   from  the
       audited consolidated financial statements at that date.



            See notes to condensed consolidated financial statements.

                                       3

<PAGE>


                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>


                                                                                                                      THREE MONTHS
                                                                                                                          ENDED
                                                                                    NINE MONTHS       SIX MONTHS        MARCH 31,
                                           THREE MONTHS ENDED SEPTEMBER  30,           ENDED            ENDED             1998
                                           ---------------------------------       SEPTEMBER 30,     SEPTEMBER 30,     PREDECESSOR
                                                1999              1998                 1999              1998            COMPANY
                                           ----------------  ---------------      ---------------   ---------------  ---------------
<S>                                        <C>               <C>                  <C>               <C>              <C>

Service revenue                            $        25,168   $       21,153       $       71,778    $     41,396     $      18,790

Operating expenses:
   Direct                                            9,900            7,265               24,097          14,277             6,406
   Sales and marketing                               5,581            5,186               17,798          11,986             5,790
   Engineering and technical services                2,436            2,779                6,817           4,328             1,898
   General and administrative                        3,482            3,351               10,793           7,308             3,707
   Depreciation and amortization                    17,741           16,327               51,644          32,443            12,483
   Merger costs                                         --              196                   --             301            12,145
                                           ---------------   --------------       --------------    ------------     -------------
     Total operating expenses                       39,140           35,104              111,149          70,643            42,429
                                           ---------------   --------------       --------------    ------------     -------------

Loss from operations                               (13,972)         (13,951)             (39,371)        (29,247)          (23,639)

   Interest  income                                  2,182            2,427                4,253           7,574             5,425
   Interest expense                                (19,434)         (14,996)             (50,853)        (32,748)          (21,190)
   Other income (expense)                               88              219                  446             120              (287)
                                           ---------------   --------------       --------------    ------------     -------------

Loss before income taxes                           (31,136)         (26,301)             (85,525)        (54,301)          (39,691)

Income tax benefit (expense)                          (486)          (3,313)               2,153           4,932                --
                                           ---------------   --------------       --------------    ------------     -------------

Net loss                                           (31,622)         (29,614)             (83,372)        (49,369)          (39,691)

Preferred stock dividend, net of                        --               --                   --              --             1,387
forfeitures                                ---------------   --------------       --------------    ------------     -------------

Net loss attributable to common
stockholders                               $       (31,622)  $      (29,614)      $      (83,372)   $    (49,369)    $     (38,304)
                                           ===============   ==============       ==============    ============     =============

</TABLE>



            See notes to condensed consolidated financial statements.

                                       4

<PAGE>


                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>


                                                                                                    THREE MONTHS
                                                                                                       ENDED
                                                              NINE MONTHS        SIX MONTHS          MARCH 31,
                                                                 ENDED              ENDED              1998
                                                             SEPTEMBER 30,      SEPTEMBER 30,       PREDECESSOR
                                                                 1999               1998              COMPANY
                                                            ----------------    --------------    ---------------
<S>                                                         <C>                <C>                <C>

OPERATING ACTIVITIES
Net loss                                                    $        (83,372)  $       (49,369)   $       (39,691)
Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities:
   Deferred income tax provision                                       3,168             2,231                 --
   Depreciation and amortization                                      51,644            32,443             12,483
   Amortization of deferred financing costs                               --             1,303                609
   Provision for bad debts                                             1,969               650                150
   Non-cash interest expense                                          25,088            12,943             10,070
   Other                                                                 795               264              1,644
Changes in operating assets and liabilities:
   Accounts receivable                                                (5,164)           (1,934)            (1,408)
   Prepaid expenses and other current assets                          (5,341)              881                693
   Other assets                                                       (5,028)              188                201
   Accounts payable, accrued liabilities and other
     current liabilities                                              (2,014)           19,890             (2,186)
   Interest payable                                                  (12,456)              (52)           (12,510)
   Customer deposits                                                   1,984               811                 23
   Deferred revenue                                                     (142)              552                297
                                                            ----------------   ---------------    ---------------
Net cash provided by (used in) operating activities                  (28,869)           20,801            (29,625)

INVESTING ACTIVITIES
Increase in restricted and segregated assets                          (2,890)           (5,825)            (4,629)
Uses of and transfers from restricted and
   segragated cash (see Note G)                                      143,879           269,791             35,938
Satellite construction costs                                        (190,035)         (261,394)           (14,575)
Capital expenditures, net (see Note G)                               (86,943)          (10,794)            (3,805)
                                                            ----------------   ---------------    ---------------
Net cash provided by (used in) investing activities                 (135,989)           (8,222)            12,929

FINANCING ACTIVITIES
Equity contributed from Loral                                         51,561                --                 --
Due to Loral                                                          96,247            (6,366)                --
Proceeds from issuance of common stock, net of
   issuance costs                                                         --                --              2,117
Repayment of senior notes and notes payable                             (902)             (534)              (254)
Payment of satellite incentive obligations                              (181)           (3,128)              (324)
Other                                                                 (1,208)              653             (1,051)
                                                            ----------------   ---------------    ---------------
Net cash provided by (used in) financing activities                  145,517            (9,375)               488

Net decrease in cash and cash equivalents                            (19,341)            3,204            (16,208)
Cash and cash equivalents at beginning of period                      35,861            53,801             70,009
                                                            ----------------   ---------------    ---------------
Cash and cash equivalents at end of period                  $         16,520  $         57,005    $        53,801
                                                            ================  ================    ===============


</TABLE>


            See notes to condensed consolidated financial statements.

                                       5

<PAGE>


                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -- CONTINUED
                                 (IN THOUSANDS)
                                   (UNAUDITED)



SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>


                                                                                                THREE MONTHS
                                                                                                    ENDED
                                                          NINE MONTHS         SIX MONTHS          MARCH 31,
                                                             ENDED              ENDED               1998
                                                         SEPTEMBER 30,      SEPTEMBER 30,       PREDECESSOR
                                                             1999               1998               COMPANY
                                                         -------------      -------------      --------------
<S>                                                      <C>                <C>                <C>


Preferred stock dividend, net of forfeitures             $          --      $          --      $       (1,387)
                                                         =============      =============      ==============

Conversion of redeemable preferred stock
   to common stock                                                  --                 --              69,888
                                                         =============      =============      ==============

Conversion of Company common stock and
   stock options to Loral common stock as the
   result of the Loral Merger                                       --                 --             469,000
                                                         =============      =============      ==============

Conversion of subordinated debentures, accrued
   interest, and deferred financing costs to
   common  stock                                                    --                 --              50,000
                                                         =============      =============      ==============

Issuance of common stock for preferred
   stock dividend                                                   --                 --               5,458
                                                         =============      =============      ==============

Issuance of common stock and warrants                               --                 --               4,757
                                                         =============      =============      ==============

Interest paid                                            $      54,159      $      15,614      $       25,237
                                                         =============      =============      ==============

</TABLE>


            See notes to condensed consolidated financial statements.

                                       6

<PAGE>


                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE A.  BASIS OF PRESENTATION

ORGANIZATION AND BUSINESS

Loral Orion, Inc. (the "Company" or "Loral Orion"), is a holding company with no
assets or operations other than its investments in its subsidiaries. Through the
operations of its subsidiaries,  the Company's  principal  business is providing
satellite-based  communications services for private communications networks and
video  distribution and other satellite  transmission  services.  In 1998, Loral
Orion organized its business into two distinct operating segments as follows:

   Fixed  Satellite  Services:   Leasing  transponder   capacity  and  providing
   value-added  services  to  customers  for a  wide  variety  of  applications,
   including the distribution of broadcast programming, news gathering, business
   television,  distance learning and  direct-to-home  ("DTH")  services.  As of
   January 1, 1999, the Company's  fixed satellite  services  ("FSS") assets are
   managed by Loral Skynet, a division of Loral SpaceCom Corporation;

   Data Services:  Business in  development.  Providing  managed  communications
   networks and Internet and intranet  services,  using transponder  capacity on
   the Loral Skynet Telstar and Loral Orion fleets and third party satellites.

GENERAL

The accompanying unaudited condensed consolidated financial statements have been
prepared by the Company  pursuant to the rules of the  Securities  and  Exchange
Commission  ("SEC") and, in the opinion of the Company,  include all adjustments
(consisting of normal recurring  accruals)  necessary for a fair presentation of
the  results  of  operations,   financial  position  and  cash  flows.   Certain
information and footnote  disclosures  normally included in financial statements
prepared in accordance with generally accepted  accounting  principles have been
condensed  or omitted  pursuant  to SEC rules.  The  Company  believes  that the
disclosures  made are  adequate  to keep the  information  presented  from being
misleading.  The  results  of  operations  for the three and nine  months  ended
September 30, 1999 are not necessarily  indicative of the results to be expected
for the full year. It is suggested  that these  financial  statements be read in
conjunction with the Company's latest Annual Report on Form 10-K.

ACQUISITION OF THE COMPANY BY LORAL

On March 20, 1998,  Orion Network  Systems,  Inc.  ("Orion" or the  "Predecessor
Company") was acquired by Loral Space & Communications Ltd.  ("Loral"),  through
the merger (the "Merger") of a wholly owned  subsidiary of Loral,  with and into
Orion.  Loral  consummated  the  acquisition by issuing 18 million shares of its
common stock and assuming existing Orion vested options and warrants to purchase
1.4 million  shares of Loral common  stock  representing  an aggregate  purchase
price of $472.5 million.  Orion was the surviving  corporation of the Merger and
thereby became a subsidiary of Loral. At the effective date of the Merger, Loral
contributed its investment in Orion to Loral Space & Communications Corporation,
a wholly owned  subsidiary of Loral,  and Orion changed its name to "Loral Orion
Network Systems, Inc." The name has since been changed to "Loral Orion, Inc."

The consolidated financial statements for the three months ended March 31, 1998,
reflect the results of operations of the Predecessor  Company.  The consolidated
financial  statements  subsequent  to March 31,  1998,  reflect  the  results of
operations of Loral Orion, Inc.  Hereafter,  references to the "Company" include
both Loral Orion, Inc. and its predecessor, Orion Network Systems, Inc.

The Merger was  accounted for as of March 31, 1998,  using the purchase  method.
Accordingly,  the consolidated  balance sheet at September 30, 1999 and December
31, 1998 reflects the push-down of the purchase price  allocations to the assets
and  liabilities.  The purchase  price  represented  $447.7 million in excess of
Orion's net book value, which was primarily  allocated to costs in excess of net
assets acquired of $620.4 million, and a fair value

                                       7

<PAGE>



                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

adjustment of $153.4  million to increase the carrying  value of Orion's  senior
notes and senior  discount  notes.  In addition,  Loral agreed to assume Orion's
unvested employee stock options, which resulted in a new measurement date and an
unearned compensation charge of $4.3 million, to be amortized over the remaining
vesting period of the options.

Had the  acquisition  of the Company  occurred on January 1, 1998, the unaudited
pro forma sales, operating loss and net loss for the nine months ended September
30,  1998 would have been  $60.2  million,  $45.1  million,  and $78.1  million,
respectively.  These  results,  which are based on various  assumptions  are not
necessarily  indicative  of what would have  occurred had the  acquisition  been
consummated on January 1, 1998.

COMPREHENSIVE INCOME

The  Company  follows  Statement  of  Financial  Accounting  Standards  No. 130,
Reporting  Comprehensive Income ("SFAS 130") for the reporting and disclosure of
comprehensive  income and its components.  SFAS 130 requires unrealized gains or
losses on the Company's foreign currency translation  adjustments to be included
in other comprehensive income (loss). Total comprehensive loss is as follows (in
thousands):

<TABLE>
<CAPTION>


                                                                                  THREE MONTHS
                                                                                      ENDED
                                            NINE MONTHS         SIX MONTHS          MARCH 31,
                                               ENDED              ENDED               1998
                                           SEPTEMBER 30,       SEPTEMBER 30,       PREDECESSOR
                                               1999                1998              COMPANY
                                          ----------------   ----------------    ----------------
<S>                                       <C>                <C>                 <C>

Net loss                                  $         83,372   $         49,369    $         39,691
Cumulative translation adjustment                    1,095                350                  --
                                          ----------------   ----------------    ----------------
Total comprehensive loss                  $         84,467   $         49,719    $         39,691
                                          ================   ================    ================

</TABLE>


EARNINGS PER SHARE

Earnings per share is not presented since it is not considered meaningful due to
the Merger with Loral and recapitalization of the Company.

NOTE B.  RESTRICTED AND SEGREGATED CASH

As of  September  30,  1999,  the  Company  had  approximately  $50  million  of
restricted  cash for  interest  payments on its Senior Notes and $147 million of
segregated  cash  expected to be used for the final  payment on the  purchase of
Apstar IIR (see Note G).


                                       8

<PAGE>


                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE C.  LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>


                                                                             SEPTEMBER 30,         DECEMBER 31,
                                                                                 1999                  1998
                                                                             -------------         ------------
<S>                             <C>               <C>

Senior notes (net of premium of $60.2 million and $64.6 million
   at September 30, 1999 and December 31, 1998, respectively)                $       503,230       $       507,573
Senior discount notes (maturity value of $484 million)                               438,242               408,812
Notes payable - TT&C Facility                                                          4,051                 4,953
Satellite incentive obligations                                                       11,195                11,376
Other                                                                                    486                   781
                                                                             ---------------       ---------------
   Total long-term debt                                                              957,204               933,495
       Less: current portion                                                          (2,049)               (1,826)
                                                                             ---------------       ---------------
   Long-term debt, less current portion                                      $       955,155       $       931,669
                                                                             ===============       ===============

</TABLE>


In connection  with the Merger,  Loral did not assume the Company's  outstanding
debt. Such debt remains  outstanding and is non-recourse to Loral.  The carrying
value of the Company's  Senior Notes and Senior  Discount Notes was increased to
reflect a fair value adjustment of $153.4 million in connection with the Merger,
based on quoted market prices at March 31, 1998.

NOTE D.  NOTE DUE TO LORAL

During 1999,  Loral Orion entered into an  intercompany  note with Loral Space &
Communications Corporation for a revolving credit facility. The interest rate on
the borrowings is Libor plus 275 basis points.  Borrowings can be for periods of
1, 2, 3, or 6 months.  The total amount  outstanding  at September  30, 1999 was
$92.6 million.  The proceeds are being used to fund Orion 2 and Orion 3 or their
replacements and for general corporate purposes.  This note is due on demand and
can be prepaid at any time without penalty.  Interest expense through  September
30, 1999 was $2.6 million.

NOTE E.  INCOME TAXES

The Company is included in the  consolidated  U.S.  Federal income tax return of
Loral Space & Communications  Corporation.  Pursuant to a tax sharing  agreement
for 1998 and 1999 with Loral Space & Communications Corporation,  the Company is
entitled  to  reimbursement  for the use of its tax losses  when such losses are
utilized by the consolidated  group. The Company recorded a net receivable under
this tax sharing agreement of approximately  $0.8 million and $5.4 million and a
deferred tax provision of $1.3 million and $3.2 million,  resulting in a net tax
provision  of $0.5  million  for the three  months and a net tax benefit of $2.2
million for the nine months ended  September 30, 1999.  The Company's  effective
tax benefit  rate of 2.5% for the nine months ended  September  30, 1999 differs
from  the  federal  statutory  rate  of  35%,  due  to the  valuation  allowance
established  for  the  carryforward  of  the  current  year  tax  loss  and  the
non-deductible  amortization  of costs in  excess  of net  asset  acquired.  The
deferred tax asset of $50.7 million as of September 30, 1999 on the accompanying
balance  sheet arises from the tax effect of the temporary  differences  between
the carrying  amount of the Senior Notes and the Senior  Discount  Notes payable
for financial and income tax purposes.

                                       9

<PAGE>

                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE F.  SEGMENTS

The  Company's  two  operating  segments are fixed  satellite  services and data
services (see Note A).

In  evaluating  financial  performance,  management  uses  revenues and earnings
before  interest,  taxes and  depreciation  and  amortization  ("EBITDA") as the
measure of a segment's profit or loss.  Beginning January 1, 1999, the Company's
fixed  satellite  services  ("FSS")  assets are  managed by Loral  Skynet.  As a
result,  in 1999 the FSS segment  began leasing  satellite  capacity to the data
services segment for its use of Orion 1 (see Note G).

Summarized financial information  concerning the Company's operating segments is
as follows (in millions):

                      THREE MONTHS ENDED SEPTEMBER 30, 1999
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                  FIXED                                TOTAL
                                                SATELLITE             DATA           REPORTABLE        INTERSEGMENT
                                                 SERVICES           SERVICES          SEGMENTS         ELIMINATIONS     CONSOLIDATED
                                              -------------      -------------     -------------     ----------------   ------------
<S>                                           <C>                <C>               <C>               <C>                <C>

Revenue from external customers ......        $         8.1      $       17.1      $       25.2      $          --      $      25.2
Intersegment revenue .................                  1.8              --                 1.8               (1.8)              --
                                              -------------      ------------      ------------      -------------      -----------
Gross revenue ........................        $         9.9      $       17.1      $       27.0      $        (1.8)     $      25.2
                                              -------------      ------------      ------------      -------------      -----------
EBITDA 1 .............................        $         6.1      $       (2.4)     $        3.7      $          --      $       3.7
Depreciation and amortization ........                 13.7               4.0              17.7                 --             17.7
                                              -------------      ------------      ------------      -------------      -----------
Loss from operations .................        $        (7.6)     $       (6.4)     $      (14.0)     $          --      $     (14.0)
                                              -------------      ------------      ------------      -------------      -----------
Total assets  ........................        $     1,608.5      $       71.4      $    1,679.9      $          --      $   1,679.9
                                              -------------      ------------      ------------      -------------      -----------

</TABLE>

                      THREE MONTHS ENDED SEPTEMBER 30, 1998
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                  FIXED                                TOTAL
                                                SATELLITE             DATA           REPORTABLE
                                                 SERVICES           SERVICES          SEGMENTS       CONSOLIDATED
                                              -------------      -------------     -------------     -------------
<S>                                           <C>                <C>               <C>               <C>

Revenue from external customers ......        $         8.1      $       13.1      $       21.2      $       21.2
                                              -------------      ------------      ------------      ------------
EBITDA 1 .............................        $         6.9      $      (4.4)      $        2.5      $        2.5
Depreciation and amortization ........                 13.7              2.6               16.3              16.3
Merger costs .........................                   --               --                 --               0.2
                                              -------------      ------------      ------------      ------------
Loss from operations..................        $       (6.8)      $      (7.0)      $      (13.8)     $      (14.0)
                                              -------------      ------------      ------------      ------------
Total assets  ........................        $     1,310.7      $      111.6      $    1,422.3      $    1,422.3
                                              -------------      ------------      ------------      ------------

</TABLE>

     (1) EBITDA (which is equivalent  to  operating  income  (loss)  before
     depreciation and amortization and merger costs) is provided because it
     is a measure commonly used in the  communications  industry to analyze
     companies  on  the  basis  of  operating  performance,   leverage  and
     liquidity  and is  presented  to enhance  the  understanding  of Loral
     Orion's operating results.  However, EBITDA should not be construed as
     an alternative to net income as an indicator of a company's  operating
     performance,  or cash flow from operations as a measure of a company's
     liquidity.  EBITDA may be calculated  differently and, therefore,  may
     not be  comparable  to  similarly  titled  measures  reported by other
     companies.
                                    10


<PAGE>


                             LORAL ORION, INC.
  (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

                      NINE MONTHS ENDED SEPTEMBER 30, 1999

                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                  FIXED                                TOTAL
                                                SATELLITE             DATA           REPORTABLE        INTERSEGMENT
                                                 SERVICES           SERVICES          SEGMENTS         ELIMINATIONS     CONSOLIDATED
                                              -------------      -------------     -------------     ----------------   ------------
<S>                                           <C>                <C>               <C>               <C>                <C>

Revenue from external customers ......        $         22.9     $        48.9     $       71.8      $          --      $      71.8
Intersegment revenue .................                   5.3                --              5.3               (5.3)              --
                                              --------------     -------------     ------------      -------------      -----------
Gross revenue ........................        $         28.2     $        48.9     $       77.1      $        (5.3)     $      71.8
                                              --------------     -------------     ------------      -------------      -----------
EBITDA  ..............................        $         17.4     $        (5.1)    $       12.3      $          --      $      12.3
Depreciation and amortization ........                  40.6              11.0             51.6                 --             51.6
                                              --------------     -------------     ------------      -------------      -----------
Loss from operations .................        $        (23.2)    $       (16.1)    $      (39.3)     $          --      $     (39.3)
                                              --------------     -------------     ------------      -------------      -----------
Total assets  ........................        $      1,608.5     $        71.4     $    1,679.9      $          --      $   1,679.9
                                              --------------     -------------     ------------      -------------      -----------

</TABLE>

                       SIX MONTHS ENDED SEPTEMBER 30, 1998
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                  FIXED                                TOTAL
                                                SATELLITE             DATA           REPORTABLE
                                                 SERVICES           SERVICES          SEGMENTS       CONSOLIDATED
                                              -------------      -------------     -------------     -------------
<S>                                           <C>                <C>               <C>               <C>

Revenue from external customers ......        $        16.4      $      25.0       $       41.4      $       41.4
                                              -------------      -----------       ------------      ------------
EBITDA  ..............................        $        10.4      $      (6.9)      $        3.5      $        3.5
Depreciation and amortization ........                 26.4              6.0               32.4              32.4
Merger costs .........................                   --               --                 --               0.3
                                              -------------      -----------       ------------      ------------
Loss from operations..................        $      (16.0)      $     (12.9)      $      (28.9)     $      (29.2)
                                              -------------      -----------       ------------      ------------
Total assets  ........................        $     1,310.7      $     111.6       $    1,422.3      $    1,422.3
                                              -------------      -----------       ------------      ------------

</TABLE>


                        THREE MONTHS ENDED MARCH 31, 1998
                               PREDECESSOR COMPANY
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                  FIXED                                TOTAL
                                                SATELLITE             DATA           REPORTABLE
                                                 SERVICES           SERVICES          SEGMENTS       CONSOLIDATED
                                              -------------      -------------     -------------     -------------
<S>                                           <C>                <C>               <C>               <C>

Revenue from external customers ......        $         7.9      $      10.9       $       18.8      $       18.8
                                              -------------      -----------       ------------      ------------
EBITDA ...............................        $         5.1      $      (4.1)      $        1.0      $        1.0
Depreciation and amortization ........                  9.6              2.9               12.5              12.5
Merger costs .........................                   --               --                 --              12.1
                                              -------------      -----------       ------------      ------------
Loss from operations..................        $        (4.5)     $      (7.0)      $      (11.5)     $      (23.6)
                                              -------------      -----------       ------------      ------------

</TABLE>
                                       11


<PAGE>


                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE G. COMMITMENTS AND CONTINGENCIES

Orion 1 -- In November  1995, a portion of the Orion 1 satellite  experienced an
anomaly that resulted in a temporary service interruption, lasting approximately
two hours, in the dedicated  capacity  serving the European portion of Orion 1's
services.  Full service to all affected  customers was restored using  redundant
equipment  on the  satellite.  The Company  believes,  based on the data and the
Telesat Report,  that,  because the redundant  component is functioning fully in
accordance with  specifications and the performance record of similar components
is strong, the anomalous behavior is unlikely to affect the expected performance
of the satellite over its useful life. Furthermore,  there has been no effect on
the Company's  ability to provide services to customers.  However,  in the event
that  the  currently  operating  component  fails,  Orion 1 would  experience  a
significant loss of usable capacity.  In such event,  while the Company would be
entitled to  insurance  proceeds of  approximately  $53 million as of  September
1999,  and could lease  replacement  capacity  and  function as a reseller  with
respect to such  capacity,  the loss of capacity  would have a material  adverse
effect on the Company.

Orion 2 -- During  the  second  quarter  of 1998,  the  Company  entered  into a
satellite procurement contract with Space Systems/Loral, Inc. ("SS/L"), a wholly
owned  subsidiary  of  Loral,  for the  construction  and  launch of the Orion 2
satellite for the operation in the Atlantic Ocean region (the "SS/L  Contract").
The SS/L satellite design provides for 38 Ku-band  transponders with a footprint
covering  the  Eastern  United  States,   Southeastern   Canada,   Europe,   the
Commonwealth of Independent  States, the Middle East, North and South Africa and
South  America.  Loral Orion's cash will be used to fund the SS/L Contract up to
an amount that, will not exceed $202 million. Any requirements to SS/L in excess
of $202 million  (estimated to be approximately $60 million) for Orion 2 will be
funded with  additional  equity  contributed  by Loral.  Loral has funded  $51.6
million of equity for Orion 2 through September 30, 1999.

Orion 2 was  launched  aboard an Ariane 44L launch  vehicle on October 19, 1999,
into the orbital slot located at 15(degree) W.L. where in-orbit testing is being
conducted.  The Company is currently in  negotiations  with Eutelsat to complete
coordination  of Orion 2 with the Eutelsat  satellite in the region.  Orion 2 is
expected to enter  service in January  2000,  after orbit  raising and  in-orbit
testing  are  completed.  Loral  Skynet  will  manage  the  leasing of Orion 2's
capacity.

Orion 3 -- In January  1997,  the Company  entered into a satellite  procurement
contract with Hughes Space and  Communications  Corporation for the construction
and launch of Orion 3, for which  construction  commenced in December  1996. The
contract  provided  for  delivery in orbit of Orion 3, for a firm fixed price of
$203 million,  excluding launch insurance and $8 million of incentive  payments.
The  orbital  slot for Orion 3 covers  broad  areas of the Asia  Pacific  region
including China, Japan, Korea, Southeast Asia, Australia,  New Zealand,  Eastern
Russia and Hawaii.

On May 4, 1999, the Company's  Orion 3 broadcast  video and data  communications
satellite  was placed  into a  lower-than-expected  orbit  after its launch on a
Boeing Delta III rocket from Cape Canaveral Air Station,  Florida.  According to
Boeing,  the Delta III's second stage  apparently  failed to complete its second
stage burn,  and, as a result,  the  satellite  achieved an orbit well below the
planned final altitude.  The satellite cannot be used for the company's intended
purpose as a result.

The  satellite  and launch were fully  insured for  approximately  $266 million,
which was received in the third  quarter of 1999.  DACOM  Corporation,  a Korean
communications  company which had purchased eight  transponders on Orion 3 for a
total of $89 million,  had made prepayments of approximately  $34 million to the
Company.  Under  Loral  Orion's  agreement  with DACOM,  the amount  prepaid was
refunded in July 1999.  Loral Orion's debt covenants  require that the insurance
proceeds be used to acquire a replacement  satellite within 15 months of receipt
of such proceeds, or to pay down debt (see Note B).

                                       12

<PAGE>


                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

On September 28, 1999,  Loral Asia Pacific  Satellite (HK) Limited ("Loral Orion
HK"), a subsidiary of Loral Orion,  purchased from APT Satellite Company Limited
("APT") all  transponder  capacity on the Apstar IIR satellite,  (except for one
C-band transponder retained by APT) for approximately $273 million.  Apstar IIR,
which was manufactured by SS/L, was launched in October 1997 and has an expected
mission life of 15 years.  Loral Orion HK will have full use of 27 C-band and 16
Ku-band  transponders aboard Apstar IIR for the remaining life of the satellite.
Located at 76.5 degrees  East,  Apstar IIR covers a region that  includes  Asia,
Europe,  Africa  and  Australia,  which  represents  over  75%  of  the  world's
population.  Under the  purchase  agreement,  Loral  Orion HK will also have the
option to lease from APT  replacement  satellites upon the end of life of Apstar
IIR.

On September 28, 1999,  Loral Orion HK made an initial payment of  approximately
$79 million to APT and agreed to pay  approximately  $194 million in cash to APT
over the next six months as follows:  approximately  $12 million on December 31,
1999 and approximately  $182 million on March 27, 2000.  Insurance proceeds from
the Orion 3 failure  were used to fund the  initial  payment and will be used to
fund a portion of the remaining  payments.  Loral has agreed to guarantee  Loral
Orion HK's obligations to APT under the purchase agreement.

Agreements  with  Loral  Skynet -- During  the  fourth  quarter  of 1998,  Loral
completed its  integration  plan for Loral Orion and  transferred  management of
Loral  Orion's  satellite  capacity  leasing and  satellite  operations to Loral
Skynet,  effective  January 1, 1999. Loral Orion and Loral Skynet, a division of
Loral SpaceCom Corporation, which in turn is a wholly-owned subsidiary of Loral,
have entered into agreements (the "Loral Skynet  Agreements")  effective January
1, 1999,  whereby  Loral  Skynet  provides to Orion (i)  marketing  and sales of
satellite  capacity  services on the Orion satellite network and related billing
and  administration  of  customer  contracts  for  those  services  (the  "Sales
Services")  and (ii)  telemetry,  tracking  and control  services  for the Orion
satellite  network  (the  "Technical  Services",  and  together  with the  Sales
Services,  the "Services").  Orion is charged Loral Skynet's costs for providing
these services plus a 5 percent administrative fee.

Litigation -- Loral Orion is party to various  litigation  arising in the normal
course of its operations.  In the opinion of management,  the ultimate liability
for these  matters,  if any,  will not have a material  adverse  effect on Loral
Orion's financial position or results of operations.

NOTE H.  RECLASSIFICATIONS

Certain prior period  amounts have been  reclassified  to conform to the current
period presentation.

                                       13

<PAGE>


                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

    Except  for  the  historical   information  contained  herein,  the  matters
discussed in the following  Management's  Discussion  and Analysis of Results of
Operations and Financial Condition of the Company, are not historical facts, but
are  "forward-looking  statements,"  as that  term  is  defined  in the  Private
Securities  Litigation  Reform  Act of 1995.  In  addition,  the  Company or its
representatives have made and may continue to make  forward-looking  statements,
orally or in writing, in other contexts,  such as in reports filed with the SEC,
press releases or statements  made with the approval of an authorized  executive
officer of the Company.  These  forward-looking  statements can be identified by
the use of forward-looking  terminology such as "believes,"  "expects," "plans,"
"may,"  "will,"  "would,"   "could,"   "should,"   "anticipates,"   "estimates,"
"project,"  "intend,"  or  "outlook"  or the  negative  of these  words or other
variations  of these  words or  other  comparable  words,  or by  discussion  of
strategy that involve risks and uncertainties.  These forward-looking statements
are only  predictions,  and actual events or results may differ  materially as a
result of a wide variety of factors and conditions, many of which are beyond the
Company's  control.  Some of  these  factors  and  conditions  include:  (i) the
harshness of the space  environment in which the Company's  satellites  operate;
(ii) governmental or regulatory  changes;  (iii) access to scarce launch vehicle
resources and risk of launch failures;  (iv) severe competition in our industry;
and (v) the Company and its subsidiaries owe significant amounts of money. For a
detailed  discussion  of  these  factors  and  conditions,  please  refer to the
periodic  reports that the Company files with the SEC. In  addition,the  Company
operates in an industry sector where  securities  values may be volatile and may
be influenced by economic and other factors beyond the Company's control.

GENERAL

Loral Orion,  Inc. (the  "Company" or "Loral  Orion"),  formerly  known as Loral
Orion Network  Systems,  Inc., is a holding company with no assets or operations
other than its  investments in its  subsidiaries.  Through the operations of its
subsidiaries,  the  Company's  principal  business is providing  satellite-based
communications   services   for  private   communications   networks  and  video
distribution  and other satellite  transmission  services.  In 1998, Loral Orion
organized its business into two distinct operating segments as follows:

   Fixed  Satellite  Services:   Leasing  transponder   capacity  and  providing
   value-added  services  to  customers  for a  wide  variety  of  applications,
   including the distribution of broadcast programming, news gathering, business
   television,  distance learning and  direct-to-home  ("DTH")  services.  As of
   January 1, 1999, the Company's  fixed satellite  services  ("FSS") assets are
   managed by Loral Skynet, a division of Loral SpaceCom Corporation;

   Data Services:  Business in  development.  Providing  managed  communications
   networks and Internet and intranet  services,  using transponder  capacity on
   the Loral Skynet Telstar and Loral Orion fleets and third party satellites.

No  restrictions  exist  on the  ability  of the  subsidiaries  of  Loral  Orion
("Subsidiary  Guarantors")  other  than  inconsequential  subsidiaries,  to  pay
dividends  or make  other  distributions  to the  Company,  except to the extent
provided by law generally  (e.g.,  adequate capital to pay dividends under state
corporate laws).

ORION 2

During  the  second  quarter  of 1998,  the  Company  entered  into a  satellite
procurement  contract with Space  Systems/Loral,  Inc. ("SS/L"),  a wholly owned
subsidiary of Loral,  for the  construction  and launch of the Orion 2 satellite
for the operation in the Atlantic Ocean region (the "SS/L  Contract").  The SS/L
satellite design provides for 38 Ku-band  transponders with a footprint covering
the Eastern United States,  Southeastern  Canada,  Europe,  the  Commonwealth of
Independent  States,  the Middle East, North and South Africa and South America.
Loral  Orion's cash will be used to fund the SS/L Contract up to an amount that,
will not exceed $202 million. Any requirements to SS/L in excess of $202 million
(estimated  to be  approximately  $60  million)  for Orion 2 will be funded with
additional equity contributed by Loral. Loral has funded $51.6 million of equity
for Orion 2 through September 30, 1999.

                                       14

<PAGE>


LORAL ORION, INC.

     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                   (CONTINUED)

Orion 2 was  launched  aboard an Ariane 44L launch  vehicle on October 19, 1999,
into the orbital slot located at 15(degree) W.L. where in-orbit testing is being
conducted.  The Company is currently in  negotiations  with Eutelsat to complete
coordination  of Orion 2 with the Eutelsat  satellite in the region.  Orion 2 is
expected to enter  service in January  2000,  after orbit  raising and  in-orbit
testing  are  completed.  Loral  Skynet  will  manage  the  leasing of Orion 2's
capacity

ORION 3

On May 4, 1999, the Company's  Orion 3 broadcast  video and data  communications
satellite  was placed  into a  lower-than-expected  orbit  after its launch on a
Boeing Delta III rocket from Cape Canaveral Air Station,  Florida.  According to
Boeing,  the Delta III's second stage  apparently  failed to complete its second
stage burn,  and, as a result,  the satellite,  manufactured by Hughes Space and
Communications  Corporation,  achieved  an orbit  well below the  planned  final
altitude.  As a result,  the satellite cannot be used for the Company's intended
purpose.

The  satellite  and launch were fully  insured for  approximately  $266 million,
which was received in the third  quarter of 1999.  DACOM  Corporation,  a Korean
communications  company which had purchased eight  transponders on Orion 3 for a
total of $89 million,  had made prepayments of approximately  $34 million to the
Company.  Under  Loral  Orion's  agreement  with DACOM,  the amount  prepaid was
refunded in July 1999.  Loral Orion's debt covenants  require that the insurance
proceeds be used to acquire a replacement  satellite within 15 months of receipt
of  such  proceeds,  or to pay  down  such  debt  (see  Note B to the  unaudited
condensed consolidated financial statements).

On September 28, 1999,  Loral Asia Pacific  Satellite (HK) Limited ("Loral Orion
HK"), a subsidiary of Loral Orion,  purchased from APT Satellite Company Limited
("APT") all  transponder  capacity on the Apstar IIR satellite,  (except for one
C-band transponder retained by APT) for approximately $273 million.  Apstar IIR,
which was manufactured by SS/L, was launched in October 1997 and has an expected
mission life of 15 years.  Loral Orion HK will have full use of 27 C-band and 16
Ku-band  transponders aboard Apstar IIR for the remaining life of the satellite.
Located at 76.5 degrees  East,  Apstar IIR covers a region that  includes  Asia,
Europe,  Africa  and  Australia,  which  represents  over  75%  of  the  world's
population.  Under the  purchase  agreement,  Loral  Orion HK will also have the
option to lease from APT  replacement  satellites upon the end of life of Apstar
IIR.  During  1999,  expected  earnings  from  Orion  3,  which  will now not be
received, will be offset, in part, by earnings from Aptstar IIR.

On September 28, 1999,  Loral Orion HK made an initial payment of  approximately
$79 million to APT and agreed to pay  approximately  $194 million in cash to APT
over the next six months as follows:  approximately  $12 million on December 31,
1999 and approximately  $182 million on March 27, 2000.  Insurance proceeds from
the Orion 3 failure  were used to fund the  initial  payment and will be used to
fund a portion of the remaining  payments.  Loral has agreed to guarantee  Loral
Orion HK's obligations to APT under the purchase agreement.

Satellite  Launch  and  Operation  Risk.  There  can be no  assurance  that  the
Company's satellites will be successfully launched or operate in accordance with
their  design.  While the Company  intends to procure  launch  insurance for its
satellites,  a total or partial loss of a satellite will involve delays and loss
of revenue,  which may impair the Company's  ability to service its indebtedness
and such insurance will not protect the Company against  business  interruption,
loss or delay of  revenues  or similar  losses and may not fully  reimburse  the
Company for its expenditures.

RESULTS OF OPERATIONS

On March 20,  1998,  Orion was  acquired  by Loral Space &  Communications  Ltd.
("Loral"),  through the merger (the  "Merger") of a wholly owned  subsidiary  of
Loral,  Loral  Satellite  Corporation,  with and into Orion.  (See Note A to the
unaudited condensed  consolidated  financial statements.) In order to provide an
understanding of the Company,

                                       15

<PAGE>


LORAL ORION, INC.

     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                   (CONTINUED)

the results of  operations  discusses  the actual  results for the three  months
ended  September  30, 1999 and  September  30, 1998;  and the actual  results of
operation for the nine months ended  September 30, 1999 and pro forma results of
operation for the nine months ended September 30, 1998. The pro forma results of
operations  have been presented to give the effect as of January 1, 1998, of the
Merger with Loral, and the Exchange,  the Orion Merger,  and the Financings (the
"Transactions"), as described in Note 1 in the Company's latest Annual Report on
Form 10-K.  The pro forma results of operations  does not purport to present the
actual  results  of  operations  of the  Company  had the  Transactions  in fact
occurred on January 1, 1998 nor is it  indicative  of the results of  operations
that may be achieved in the future.

As a result of these  Transactions,  the pro forma  adjustments  resulted  in an
increase in depreciation and amortization expenses of approximately $4.4 million
for the nine months ended September 30, 1998. This increase primarily relates to
amortization  expense for cost in excess of net assets acquired  associated with
the Loral  Merger.  The pro forma  results for 1998 also include a $12.1 million
adjustment to eliminate  merger costs.  Pro forma interest  expense for the nine
months ended  September 30, 1998  includes an adjustment to decrease  expense by
$3.2 million. The decrease in interest expense is primarily  attributable to the
amortization  of bond  premium  relating to the fair value  adjustments  and the
elimination  of  interest  expense  on the  debentures  as a result of the Loral
Merger.

In  evaluating  financial  performance,  management  uses  revenues and earnings
before interest, taxes, depreciation and amortization ("EBITDA") as a measure of
a segment's profit or loss. See Note D to the unaudited  condensed  consolidated
financial statements for additional information on segment results.

                                       16

<PAGE>


                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                   (CONTINUED)

OPERATING REVENUES (IN MILLIONS):

<TABLE>
<CAPTION>


                                                                                                                  PRO FORMA
                                                                                                                 THREE MONTHS
                                                                                                                    ENDED
                                             THREE MONTHS ENDED               NINE MONTHS       SIX MONTHS        MARCH 31,
                                                SEPTEMBER 30,                    ENDED             ENDED             1998
                                             --------------------              SEPTEMBER 30,     SEPTEMBER 30,     PREDECESSOR
                                                 1999      1998                    1999              1998            COMPANY
                                             ----------  --------              -------------     -------------    -------------
<S>                                          <C>         <C>                   <C>               <C>              <C>

Fixed satellite services  ..........         $     9.9   $     8.1             $       28.2      $       16.4     $       7.9
Data services  .....................              17.1        13.1                     48.9              25.0            10.9
Intersegment elimination ...........              (1.8)         --                     (5.3)               --              --
                                             ---------   ---------             ------------      ------------     -----------
Operating revenues .................         $    25.2   $    21.2             $       71.8      $       41.4     $      18.8
                                             ---------   ---------             ------------      ------------     -----------

</TABLE>



EBITDA 1 (IN  MILLIONS):

<TABLE>
<CAPTION>


                                                                                                                  PRO FORMA
                                                                                                                 THREE MONTHS
                                                                                                                    ENDED
                                             THREE MONTHS ENDED               NINE MONTHS       SIX MONTHS        MARCH 31,
                                                SEPTEMBER 30,                    ENDED             ENDED             1998
                                             --------------------              SEPTEMBER 30,     SEPTEMBER 30,     PREDECESSOR
                                                 1999      1998                    1999              1998            COMPANY
                                             ----------  --------              -------------     -------------    -------------
<S>                                          <C>         <C>                   <C>               <C>              <C>

Fixed satellite services  ..........         $    6.1    $     6.9             $       17.4      $       10.4     $       5.1
Data services  .....................             (2.4)        (4.4)                    (5.1)             (6.9)           (4.1)
                                             ---------   ---------             ------------      ------------     -----------
EBITDA .............................         $    3.7    $     2.5             $       12.3      $        3.5     $       1.0
                                             ---------   ---------             ------------      ------------     -----------

</TABLE>

     --------------
     (1) Pro forma EBITDA (which is equivalent  to operating  income (loss)
     before  depreciation  and  amortization)  is provided  because it is a
     measure  commonly  used  in the  communications  industry  to  analyze
     companies  on  the  basis  of  operating  performance,   leverage  and
     liquidity  and is  presented  to enhance  the  understanding  of Loral
     Orion's operating results.  However, EBITDA should not be construed as
     an alternative to net income as an indicator of a company's  operating
     performance,  or cash flow from operations as a measure of a company's
     liquidity.  EBITDA may be calculated  differently and, therefore,  may
     not be  comparable  to  similarly  titled  measures  reported by other
     companies.



                                       17

<PAGE>


                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                   (CONTINUED)

Revenue and Backlog.  Total  revenues for the three months ended  September  30,
1999 and 1998 were $25.2 million and $21.2 million,  an increase of $4.0 million
or  19  percent.  This  increase  is  primarily   attributable  to  the  private
communications  network services operations,  which included the addition of 131
customer  sites in service  compared to the same period in 1998.  Total revenues
for the nine months  ended  September  30, 1999 and pro forma nine months  ended
September  30, 1998 were $71.8 million and $60.2  million,  an increase of $11.6
million  or 19  percent,  which  is  primarily  attributable  to the  additional
customer  sites in service for private  communication  network  services for the
nine month period ended September 30, 1999 compared to the same period in 1998.

At September 30, 1999,  the Company had backlog  (representing  future  revenues
under contract) of approximately  $479.7 million  (adjusted for the debooking of
$89 million for DACOM and the $87.5  million of backlog  acquired in  connection
with Apstar IIR) compared to $299.7 million at September 30, 1998.  Revenue from
customer contract backlog is typically earned over two to five years.

Direct  Expenses.  Direct expenses for the three months ended September 30, 1999
were $9.9  million  compared to $7.3  million  for the same  period in 1998,  an
increase of $2.6  million or 36  percent.  Direct  expenses  for the nine months
ended  September 30, 1999 and the pro forma nine months ended September 30, 1998
were  $24.1  million  and  $20.7  million,  respectively.  These  increases  are
primarily  attributable to Internet access,  satellite  transponder  leasing and
terrestrial  link charges that support the  Worldcast  Internet  access  product
("Worldcast"),  which provides international internet connectivity through Orion
1.

Sales and Marketing Expenses. Sales and marketing expenses were $5.6 million for
the three months ended  September  30, 1999, as compared to $5.2 million for the
same period in  September  30,  1998,  an increase of $0.4 million or 8 percent.
Sales and  marketing  expenses for the nine months ended  September 30, 1999 and
the pro forma nine months ended September 30, 1998 were $17.8 million.

Engineering and Technical Services Expenses.  Engineering and technical services
expenses  for the three  months  ended  September  30,  1999  were $2.4  million
compared to $2.8 million for the same period in 1998, a decrease of $0.4 million
or 12 percent.  Engineering  and  technical  expenses  for the nine months ended
September  30, 1999 and the pro forma nine months ended  September 30, 1998 were
$6.8 million and $6.3 million, respectively.

General and Administrative  Expenses.  General and administrative  expenses were
$3.5  million for the three  months ended  September  30, 1999  compared to $3.4
million for the same period in 1998,  an increase of $0.1  million or 4 percent.
General and administrative expenses for the nine months ended September 30, 1999
and the pro forma nine months ended  September  30, 1998 were $10.8  million and
$11.0 million, respectively.

Depreciation and  Amortization.  Depreciation  and amortization  expense for the
three  months  ended  September  30,  1999 was $17.7  million  compared to $16.3
million for the same period in 1998,  an increase of $1.4  million or 9 percent.
Depreciation  and  amortization  expense for the nine months ended September 30,
1999 and the pro forma nine months ended  September  30, 1998 were $51.6 million
and $49.3 million, respectively.

Interest.  Interest income was $2.2 million for the three months ended September
30, 1999,  compared to $2.4 million for the three  months  ended  September  30,
1998.  Interest  income for the nine months ended September 30, 1999 and the pro
forma nine months ended  September 30, 1998 were $4.3 million and $13.0 million,
respectively.  These  decreases  were due to the  reduction  in the  balance  of
segregated  and  restricted  cash in 1999,  which  were used for the  payment of
satellites and to fund interest payments on the Company's senior notes. Interest
expense,  net  of  capitalized  interest  of  $4.8  million  and  $6.1  million,
respectively, was $19.4 million for the three months

                                       18

<PAGE>


                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                   (CONTINUED)

ended September 30, 1999, and $15.0 million for the three months ended September
30, 1998.  The increases in interest  expense are due to additional  interest on
intercompany  debt funded by Loral and less  capitalized  interest on satellites
under  construction.  Interest  expense for the nine months ended  September 30,
1999 and the pro forma nine months ended  September  30, 1998 were $50.9 million
and $50.8 million, respectively.

Income Taxes.  The Company is included in the  consolidated  U.S. Federal income
tax  return  of Loral  Space &  Communications  Corporation.  Pursuant  to a tax
sharing   agreement  for  1998  and  1999  with  Loral  Space  &  Communications
Corporation,  the Company is entitled  to  reimbursement  for the use of its tax
losses when such losses are utilized by the consolidated  group. The Company has
recorded a receivable  under this tax sharing  agreement of  approximately  $0.8
million and $5.4 million and a deferred  tax  provision of $1.3 million and $3.2
million,  resulting in a net tax  provision of $0.5 million for the three months
and $2.2 million for the nine months ended  September 30, 1999. The deferred tax
asset of $50.7  million as of  September  30, 1999 on the  accompanying  balance
sheet  arises  from the tax  effect of the  temporary  differences  between  the
carrying  amount of the Senior Notes and the Senior  Discount  Notes payable for
financial and income tax purposes.

Net Loss.  As a result of the above,  the Company  incurred  net losses of $31.6
million and $29.6  million for the three  months  ended  September  30, 1999 and
1998, respectively.  Net losses for the nine months ended September 30, 1999 and
the pro forma nine months ended  September 30, 1998 were $83.4 million and $78.1
million, respectively.

RESULTS BY OPERATING SEGMENT

Effective  January 1, 1999,  data services  contracted  with FSS for transponder
capacity, which is reflected as revenues for FSS and costs for data services. In
1998,  costs for the leasing of  transponder  capacity  for data  services  were
allocated from fixed satellite services.

Fixed Satellite Service

FSS revenue  for the three  months  ended  September  30, 1999 was $9.9  million
(including $1.8 million of  intersegment  revenue) versus $8.1 million for three
months ended September 30 1998.  EBITDA for the three months ended September 30,
1999 was $6.1  million,  or 62 percent of revenues,  versus $5.3 million  (after
allocating $1.6 million of costs to data  services),  or 65 percent of revenues,
for the three months ended  September 30, 1998.  FSS revenue for the nine months
ended  September  30,  1999  was  $28.2  million   (including  $5.3  million  of
intersegment  revenue)  versus $24.3 million for the pro forma nine months ended
September  30,  1998.  EBITDA for the nine months ended  September  30, 1999 was
$17.4,  or 62 percent of revenues,  versus $15.5 million (after  allocating $4.8
million of costs to data services), or 64 percent of revenues, for the pro forma
nine months ended September 30, 1998.

Data Services

Revenues for the data services  segment for the three months ended September 30,
1999 was  approximately  $17.1 million versus $13.1 million for the three months
ended September 30, 1998, primarily from Loral Orion's corporate data networking
and Internet and intranet services businesses. EBITDA for the three months ended
September  30, 1999 was a loss of  approximately  $2.4 million  (including  $1.8
million of charges  from FSS for  leasing  capacity on Orion 1) versus a loss of
$4.4 million  (including  $1.6 million of costs  allocated from FSS for capacity
used on Orion 1) for the three months ended  September  30, 1998.  Data services
revenue  for the nine  months  ended  September  30, 1999 and the pro forma nine
months  ended   September  30,  1998  were  $48.9  million  and  $35.9  million,
respectively.  EBITDA for the nine months ended September 30, 1999 was a loss of
$5.1 million (including $5.3 million of charges from FSS for leasing capacity on
Orion  1)  versus a loss of  $11.0  million  (including  $4.8  million  of costs
allocated  from FSS for capacity  used on Orion 1) for the pro forma nine months
ended September 30, 1998.

                                       19

<PAGE>


                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                   (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES

Existing Capital  Resources.  As of September 30, 1999, the Company had cash and
cash  equivalents of $16.5 million and restricted and segregated  cash of $197.5
million,  placed in a pledged account (approximately $50 million to pre-fund the
next two interest  payments on the Senior Notes and the remainder is expected to
fund Apstar IIR).  Restricted and segregated  cash increased as of September 30,
1999,  as a result of the  receipt of the  insurance  proceeds  from the Orion 3
launch failure.

Based upon its current  expectations for growth, the Company anticipates it will
have  additional  funding  requirements  over the next  three  years to fund the
purchase of VSATs,  Senior Notes interest payments,  other capital  expenditures
and other  operating  needs.  Interest  charges  on the  Senior  Notes are fully
provided for by restricted  cash through July 2000.  The Company does not have a
revolving credit facility.  Accordingly, the Company will need to secure funding
from Loral, or raise  additional  financing.  Sources of additional  capital may
include public or private debt, equity financings or strategic  investments.  To
the extent  that the  Company  seeks to raise  additional  debt  financing,  the
Indentures  limit  the  amount  of such  additional  debt  (under a  variety  of
provisions  contained  in such  Indentures)  and prohibit the Company from using
Orion  1,  Orion 2 or  Apstar  IIR or the  insurance  proceeds  from  Orion 3 as
collateral  for  indebtedness  for  money  borrowed.  If  the  Company  requires
additional  financing and is unable to obtain such  financing from Loral or from
outside  sources  in the  amounts  and at the  times  needed,  there  would be a
material adverse effect on the Company.

OTHER MATTERS

IMPACT OF YEAR 2000

The Year 2000 Issue is the result of computer  programs which were written using
two digits rather than four to signify a year (i.e., the year 1999 is denoted as
"99" and not  "1999").  Computer  programs  written  using  only two  digits may
recognize the year 2000 as the year 1900.  This could result in a system failure
or miscalculations causing disruption of operations.

The Company has  implemented  a Year 2000 program (the "Year 2000  Program") for
its  internal  products,  systems and  equipment,  as well as for key vendor and
customer  supplied  products,  systems and  equipment.  As part of the Year 2000
Program,  the Company is assessing  the Year 2000  capabilities  of, among other
things, its satellite,  ground equipment,  research and development  activities,
and facility management systems. The Year 2000 Program consists of the following
phases:  Inventory of Year 2000 items,  Assessment  (including  prioritization),
Remediation  (including  modification,  upgrading and replacement),  Testing and
Auditing.  This five-step  program is divided into six major  sections  covering
both information and non-information technology systems: 1) business systems, 2)
technical systems, 3) products and services, 4) imbedded  hardware/firmware,  5)
vendor supplied products and 6) customer provided products.  As of September 30,
1999, the Company has completed  approximately 99 percent of the inventory phase
and  approximately  99 percent of its assessment  phase.  The Company expects to
complete all phases of its Year 2000 Program  during the fourth quarter of 1999,
which  is  prior to any  potential  material  impact  on the  operations  of the
Company.

Both internal and external resources are being utilized to execute the Company's
plan.  The program to address Year 2000 has been underway  since July 1997.  The
incremental  costs incurred  through  September 30, 1999, for this effort by the
Company was approximately $275,000. Based on the efforts of the Company to date,
the Company anticipates  additional incremental expenses of approximately $9,000
will be incurred to substantially complete the effort.

                                       20

<PAGE>



                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
                                   (CONTINUED)

As an added  safeguard  against the  possibility  that a Year 2000 related issue
will adversely affect the Company's ability to continue operations,  contingency
plans are being  developed  under the  assumption  that worst case scenarios are
encountered  in critical  areas.  Emphasis is being placed upon the action to be
taken if  there  is  discontinuance  of  services  and/or  lack of  delivery  of
compliant products from third party suppliers, including utilities which provide
power,  water,  fuel and  telecommunications.  Baseline  contingency  plans  are
expected to be  completed  prior to the end of the fourth  quarter of 1999.  The
Company  believes  that  adequate  time will be  available  to ensure that these
contingency  plans are developed,  assessed and implemented prior to a Year 2000
issue  having a  material  negative  impact on the  operations  of the  Company.
However,  there can be no  assurance  that such plans,  will be  completed  on a
timely basis.

The cost of the  program  and the dates on which the  Company  believes  it will
substantially  complete Year 2000  modifications  are based on management's best
estimates.  Such estimates  were derived using software  surveys and programs to
evaluate  calendar date  exposures and numerous  assumptions  of future  events,
including the continued availability of certain resources, third-party Year 2000
readiness and other factors.  Because none of these estimates can be guaranteed,
actual results could differ  materially  and adversely  from those  anticipated.
Specific  factors  that  might  cause an  adjustment  of costs  are:  number  of
personnel  trained in this area,  the ability to locate and correct all relevant
computer codes, the ability to validate supplier  certification,  the ability of
vendors to meet specific commitments and similar uncertainties.

The Company's  failure to remediate a material Year 2000 problem could result in
an interruption or failure of certain basic business operations.  These failures
could  materially  and  adversely  effect the Company's  results of  operations,
liquidity and financial  condition.  Ongoing assessments are made by the Company
regarding  the Year 2000  readiness of key  third-party  suppliers.  Information
requests are  distributed to such suppliers and replies are evaluated.  When the
risk is deemed material, on-site visits to suppliers are conducted to verify the
adequacy of the information received. However, due to the general uncertainty of
the  Year  2000  problem,  including  uncertainty  with  regard  to  third-party
suppliers and customers, the Company is unable to determine at this time whether
the  consequences of Year 2000 failures will have an adverse  material impact on
the  Company's  results of  operations,  liquidity or financial  condition.  The
Company's  Year 2000  Program  is  expected  to have  considerably  reduced  the
Company's  level of  exposure  in  regard  to  third-party  supplier  Year  2000
problems.  There can be no assurance  given that the Company's Year 2000 Program
will be  successful  in avoiding any  interruption  or failure of certain  basic
business  operations,  which may have a material adverse effect on the Company's
results of operations or financial position.

ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial  Accounting Standards Board issued Statement No. 133
Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), which
requires  that all  derivative  instruments  be recorded on the balance sheet at
their fair value.  Changes in the fair value of  derivatives  are recorded  each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge  transaction and, if it is, the type
of hedge  transaction.  The Company has not yet  determined  the impact that the
adoption  of SFAS 133 will  have on its  earnings  or  financial  position.  The
Company is required to adopt SFAS 133 on January 1, 2001.

                                       21

<PAGE>


                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)

PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

         27  Financial Data Schedule

         (b) Reports on Form 8-K:

             August 18, 1999     Item 5 - Other Events - Apstar IIR acquisition.

                                 Item 7 (c) - Exhibits - Lease Agreement,  dated
                                 as of August 18,  1999,  by and  between  Loral
                                 Asia  Pacific  Satellite  (HK)  Limited and APT
                                 Satellite Company Limited.







                                       22

<PAGE>


                                LORAL ORION, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)


                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                         LORAL ORION, INC.
                                         -----------------
                                            Registrant

<TABLE>
<CAPTION>

<S>                            <C>
Date:  November 15, 1999                               /s/   RICHARD J. TOWNSEND
                               -----------------------------------------------------------------------------
                                                             Richard J. Townsend
                                              Senior Vice President and Chief Financial Officer
                                     (Principal Financial Officer and Registrant's Authorized Officer)

</TABLE>